OFCOM announces “legal separation” of BT and Openreach

Nov 29, 2016

Have OFCOM finally found their chops and separated BT & Openreach? Well not entirely, under their proposals they are forcing BT to separate Openreach into a different legal entity with an independent board and an independent chair – whilst remaining under BT ownership. A president of General Motors once said “What’s good for the country is good for General Motors” – perhaps after 2008 not so true, but does the same apply to BT now?

Why is this important? It’s about competition. BT are obviously a previously owned state monopoly and Openreach (a division of BT) still owns the vast majority of the national telecommunications infrastructure in the UK – the telephone exchanges, the in-road cabling and all the various associated bits and bobs. There are of course a few notable exceptions to this rule – Virgin Media & Kingston Communications being the larger ones, and there are a few smaller providers in certain areas.

From a competition point of view, the overriding concern that has led to this is that BT Retail (the side that most customers deal with) have control over BT Openreach (the infrastructure division) through the shareholder relationship. Other providers, notably TalkTalk and Sky being the large scale providers aren’t happy with this – Openreach (as a BT Division) will generally act (although BT claim it doesn’t) in BT Group’s best interests as a whole.

At the end of the day, is this actually all that important? Doesn’t BT Retail want the same thing as TalkTalk and everybody else? Personally, I’m going to come out and say that this all appears to be perception and OFCOM trying to show some chops to the other ISPs. I don’t see this speeding up Fibre Deployment, or National Infrastructure Investment – and I don’t think that will ever happen whilst the national infrastructure remains under shareholder control. We’ve previously supported a model similar to that of Nominet on a non-profit basis, where the various providers collectively own the infrastructure and appoint the board on an equal footing. We’ve long believed this is the best model for creating industry led investment.

Ultimately the devil will be in the detail – and we await it with interest.